E2 Treaty Investors

The E-2 Treaty Investor Non-immigrant Visa: Fact or Fiction?

There are more misunderstandings, rumors and false information about the E-2 visa than about almost any other visa category. Moreover, the increasing popularity of the EB5 program has lead potential investors to “mix and match” the criteria of the E-2 and the EB5 when discussing investments as a possible vehicle to the US.

EB5” simply means the fifth preference classification of the employment-based immigrant visa structure. Its purpose is to create employment opportunities through foreign investment. It is not the “green card investor;” but the employment-creation immigrant visa and, unlike the E-2 visa, job creation is an essential component. The current program has three variations but all three must create at least ten U.S. jobs:

a $1 million dollar investment in a new commercial enterprise which the foreign applicant will personally direct and develop to create at least ten new jobs for U.S. workers over a two year period;

a $500,000 investment in a new commercial enterprise, developed in a targeted economic area which either has greater than 150% of the national unemployment rate or is located in s specific targeted rural area, and which the foreign applicant will personally direct and develop to create at least ten new jobs for U.S. workers over a two year period; or

the Regional Center program which allows for either the $1 million or $500,000 investment if in the specific targeted area, but in which the foreign investor will typically be one of a number of limited liability partners in a partnership and will not play a direct role in the overall management and development of the commercial enterprise, but will still create at least ten U.S. jobs within the two year period.

The EB5 is a “green card” program intended for investors to acquire permanent residence in the U.S. – not merely a U.S. visa. The E-2 treaty investor visa is a non-immigrant visa which is reserved for citizens of a country with which the U.S. has an operable treaty, and is granted solely for the purpose of directing and developing the operations of a commercial enterprise in which he or she has invested. As a non-immigrant visa it is designed for a temporary period of stay in the U.S., although the E-2 visa has no specific limits as to the duration of time one may stay. Because it is based on an existing treaty, the E-2 visa, unlike almost all of the other non-immigrant visas, is applied for directly at the US Consulate.

Treaties fall under the exclusive jurisdiction of the Department of State and the State Department is represented by the U.S. Consulates abroad. The U.S. Consulate uses the State Department’s Foreign Affairs Manual or “FAM” as its governing regulatory guidelines in considering applications for E-2 visas. The basic requirements for a principal investor are: a treaty exists; the applicant possesses the nationality of the treaty country; the applicant has invested or is in the process of investing; the business is a real and commercial enterprise; the applicant’s investment is substantial and is more than a marginal one solely for earning a living; the applicant is in a position to direct and develop the enterprise; and intends to depart the U.S. when the E-2 visa status terminates.

There are several areas where many applicants misinterpret the requirements. The US business in which the E-2 applicant invests must be majority-owned or controlled by nationals of the investor’s country of citizenship who are not also permanent residents or citizens of the U.S. There is no requirement that an E-2 visa investor purchase an existing U.S. business – the applicant can start a new commercial enterprise from the ground up or buy a business. There is no magic number which defines “substantial.” Substantiality is measured by a “proportionality test.” The amount invested must be sufficient to ensure the investor’s commitment to the success of the business and to develop the business. It should represent close to 100% of the “cost or value of the business.” When buying an existing business, the value of the business is normally the purchase price or the fair market value. When starting a new business, the cost is the actual cost needed to establish such a business venture to the point of being operational. Even if the investment is considered to be substantial, the E-2 investor applicant must not be investing in a “marginal” commercial enterprise. “Marginality” is generally determined in one of two ways:

The E-2 applicant will derive an income from the investment that exceeds what is necessary to merely support the investor and his or her family, or

The business must have the capacity to make a “significant economic contribution” within five years from the date the E-2 investor will start business operations.

There are no definitions provided which specify how much of a return an E-2 investment would be required to generate to more than support the investor and the accompanying family, or as to what would constitute a “significant economic contribution.” The Consul can generally be persuaded as to the non-marginality of a commercial enterprise when given statistical information about the cost of living from local economic development councils and/or chambers of commerce or a multiplier of the poverty income guidelines. Significant economic contribution can arguably include an analysis of the number of employees or independent contractors the business anticipates within five years, the indirect employment created through the use of vendors or suppliers or the extent of contracts for services in the surrounding community. The existence of staff employed may be persuasive to meet this definition, but there is no requirement that the business have a minimum number of employees- just as there is no specific amount required as an investment.

Experienced immigration attorneys understand that each potential investment must be analyzed against the regulations and criteria as well as the Consul’s expectations. Be aware that in the US, giving immigration advice and preparing visa applications is the practice of law and is regulated by professional attorney Bar associations. Business brokers, investment consultants and tax advisors all have a place in this process, but ultimately it should be the immigration attorney who guides the final presentation. Work with a team of professionals and consider all your options before making any important decision about coming to America.